Marketing prevention to elderly Medicare beneficiaries enrolled in an HMO. The San Diego Medicare Preventive Health Project

A comprehensive marketing effort--using direct mail, telemarketing, and orientation seminars--to enroll elderly participants in a Medicare preventive health services demonstration project was undertaken in 1989. Out of the more than 11,000 eligible members in a large Medicare HMO plan in San Diego County, 1,800 (16.2%) agreed to participate. The authors describe the recruiting effort in detail and postulates reasons why the elderly resisted enrolling in the study. These results have important policy implications for the nation's Medicare program and are relevant to promoting other useful health care services in this population.     

Issues regarding health plan payments under Medicare and recommendations for reform.

The failures of the market for current Medicare health plans include poor information and price distortions and can be attributed to government policy. Reforms that could improve its structure are annual open enrollment periods, premium rebates from health management organizations (HMOs) to members, and termination of the federal government's subsidy of Medicare supplementary insurance. However, the price for a basic Medicare benefits package would still be distorted because Medicare bases its contribution on the cost of a comparable package in the fee-for-service (FFS) sector rather than on the cost of the most efficient plan available to beneficiaries in each market area. The present Medicare HMO program almost certainly increases total Medicare costs and actually discourages HMO growth by shielding beneficiaries from the true price difference between basic benefits in the HMO and FFS sectors. Lacking payment reforms, the Medicare HMO program should be terminated.     

State variations in Medicare expenditures.

OBJECTIVES: This study examined variations in Medicare expenditures across states. METHODS: 1992 data on average Medicare expenditures per enrollee, users of services per 1000 enrollees, service use per user, and payment per unit of service were compared across states for various services. Weighted least squares regression analysis was employed to examine total Medicare expenditures per enrollee by state. RESULTS: Variation in Medicare expenditures across states is driven more by average number of service users per 1000 enrollees and average service units per user than by average payment per service unit. Medicare expenditures per enrollee by state are primarily a function of Medicare HMO penetration rate (P = .000), urban area (P = .001), hospital bed supply (P = .005), elderly mortality rate (P = .012), Medicare physician assignment rate (P = .026), percentage of primary care practitioners (P = .042), and interactions between urban elderly and percentage of primary care physicians (P = .005) and Black elderly and nursing home bed supply (P = .012). CONCLUSIONS: Before sweeping Medicare cuts are undertaken or excessive reliance on managed care occurs, attention should be focused on the current disproportionate distribution of expenditures across states.     

Use and cost of skilled nursing facility services under Medicare, 1987.

The data in this article are focused on the use, covered charges, and Medicare program payments for skilled nursing services during calendar year 1987. Data for the period 1971-87 are included to show trends in the use and cost of skilled nursing facility services under the Medicare program. The impact of the Medicare prospective payment system on skilled nursing facility use is also discussed.     

Use and cost of hospital outpatient services under Medicare, 1985.

Presented in this article are program data on the use and cost of hospital outpatient (HOP) services rendered to aged and disabled Medicare beneficiaries during calendar year 1985. Trend data are also presented for calendar years 1974-85. The data shown in this article focus on charges, reimbursements, and reimbursements per enrollee as a means of measuring the cost of HOP services. The data provide information to help identify trends and patterns of care for monitoring the Medicare HOP benefit and for evaluating the impact of the inpatient hospital prospective payment system (PPS) on the use and cost of HOP services.     

The effects of predetermined payment rates for Medicare home healthcare.

OBJECTIVE: To assess the effects of an alternative method of paying home health agencies for services to Medicare beneficiaries, based on a demonstration program. DATA SOURCES/STUDY SETTING: Primary and secondary data collected on participating home health agencies in five states and their patients during the three-year demonstration period. Primary data included patient surveys at discharge and six months later, and two rounds of interviews with executive staff of the agencies. Secondary data included agencies' Medicare cost reports, quality assurance reviews, Medicare claims data, demonstration claims data, demonstration patient intake forms, and plan of treatment forms. STUDY DESIGN: The 47 agencies volunteering to participate in the demonstration were each randomly assigned to the treatment or control group. Treatment group agencies were paid a predetermined rate based on their inflation-adjusted cost per visit during the year preceding the demonstration; control group agencies were paid under Medicare's conventional cost reimbursement method. Demonstration impacts were estimated by comparing outcomes for the two groups of agencies and their respective patients, using regression models to control for any remaining differences. PRINCIPAL FINDINGS: Agencies paid under prospective rate setting were slightly better at holding per-visit cost increases below inflation than were control group agencies. The change in payment method had no effect on agencies' volume of Medicare visits or quality of care, nor on patients' use of Medicare services or other formal or informal care services. CONCLUSION: Changing from cost-based reimbursement to predetermined payment rates for Medicare home healthcare visits would not lead to large savings for the Medicare program, but would not increase costs to Medicare or adversely affect patients or their caregivers.     

Trends in Medicare home health care use: 1997-2001

The Balanced Budget Act of 1997 mandated a major overhaul in Medicare payment for home health care with an interim payment system (IPS) preceding a prospective payment system (PPS). This study extends an earlier analysis of the impact of the IPS to determine whether home health use and spendingtrends changed after the introduction of the PPS. The rapid decline in the incidence of use and visits per user under the IPS slowed in its final year and then picked up again in the first year of the PPS. In addition, average payment per visit increased sharply under the PPS. Little is known about the impact of continued large reductions in home health services since 1999.     

Differences in U.S. hospital service utilization between traditional Medicare and Medicare HMO patients

This study examines the differences between traditional U.S. Medicare and Medicare HMO Florida inpatient hospital utilization during the years 1992-1998, using nine high volume Diagnosis Related Groups. Utilization was measured by the number of ancillary services consumed, as well as the charges for those services. The analyses controlled for differences in utilization due to patient age, race, hospital size, year and market differences in hospital costs. Patient data were severity-adjusted and the analysis focused on the patients at the highest severity level. The study found that Medicare HMO patients with chronic diseases at the highest severity of illness level consumed significantly more services than traditional Medicare patients with the same chronic diseases. It was concluded that these Medicare HMO patients were either sicker (despite the severity adjustment) than the traditional Medicare patients and/or Medicare HMOs used different production processes than traditional Medicare, perhaps in order to minimize length of stay. Medicare HMO patients with acute illnesses at the highest severity level did not, in general, consume significantly more services than traditional Medicare patients at the same level of severity for the same diagnoses. The results imply that Medicare policy with regard to HMO expansion may not result in cost savings, and may, instead, result in higher costs if the proportion of the Medicare population hospitalized with chronic illnesses increases.     

The financial performance of selected investor-owned and not-for-profit system hospitals before and after Medicare prospective payment.

This article analyzes determinants of cost and profitability, including the influence of Medicare prospective payment (PPS), between 1983 and 1985 for nearly 300 hospitals belonging to investor-owned (IO) and not-for-profit (NFP) systems. Using approaches that assure comparability of financial data, and including case mix, quality, competition, and regulation measures, the findings indicate that (1) in both years, competitive environment, case mix, age of facility, and scope of diversified services were important determinants of average cost, while a process measure of quality was insignificant and the independent effect of ownership type was insignificant for cost; (2) effects of HMO competition and hospital strategy were stronger in 1985 than in 1983; (3) operating margins for all types of hospitals showed increases, with a somewhat greater improvement for NFP system members; and (4) significantly greater declines in volume of care occurred for IO system members. Implications for future research are discussed.     

Use and cost of short-stay hospital inpatient services under Medicare, 1988

In this article, data are presented on trends in the use of and program payments for inpatient short-stay hospital services to Medicare beneficiaries. The data on the services used by aged and disabled Medicare beneficiaries are presented for the years 1972 through 1988. The discussion is focused on trends in utilization and program payments resulting from the implementation of the Medicare prospective payment system. The State data for 1988 consist of utilization and program payment statistics by the residence of the beneficiaries in urban and rural areas. This is the first time that inpatient hospital data have been presented in this manner.     

Biased enrollment of Medicare beneficiaries in HMO plans--implications for Medicare costs

Policymakers assumed that the enrollment of Medicare beneficiaries in health maintenance organization (HMO) plans would generate significant cost savings for Medicare. The Health Care Financing Administration (HCFA) calculates the reimbursement to HMOs per Medicare beneficiary on the basis of individual and community-specific characteristics. Estimates of the individual-specific profitability rate for enrolling an individual in a Medicare HMO risk plan suggest that the probability of enrollment in HMOs increases with a higher profitability score. The probability of not enrolling high-loss cases is found to be high, indicating that the biased selection in HMO plans actually increases the overall cost of running the Medicare program.     

Geographic variation in determinants of Medicare managed care enrollment

OBJECTIVE: To examine the effect of adjusted average per capita cost (AAPCC) rate and volatility on Medicare risk plan enrollment at the county level. DATA SOURCES: Secondary data from the Health Care Financing Administration's office of managed care and other sources were merged to create comprehensive data on all Medicare risk plans in 3,069 of the 3,112 U. S. counties in December 1996. STUDY DESIGN: A two-step least squares regression was estimated to examine the effects of AAPCC rate and volatility, commercial HMO enrollment, market factors, and characteristics of the county population on Medicare HMO enrollment. The model was also used to simulate the effects of the Balanced Budget Act of 1997. Data from the Health Care Financing Administration were merged with other sources at the county level. The Federal Information Processing Standards code and a crosswalk file matching that code with the county name linked the data across sources. PRINCIPLE FINDINGS: The AAPCC rate has a small positive effect on the probability of Medicare HMO availability and enrollment. However, commercial HMO enrollment has a much stronger positive effect on Medicare HMO enrollment. Volatility has a negative effect on the probability of any Medicare HMO enrollment. CONCLUSIONS: The results suggest that payment changes enacted as part of the Balanced Budget Act will have a limited effect on Medicare HMO enrollment, especially in rural areas. Other policy changes are needed to stimulate Medicare HMO enrollment.     

Service-level selection by HMOs in Medicare

In the federal Medicare program, contracting health maintenance organizations (HMOs) are paid on a capitated basis. There has long been concern that an "adverse selection" of risks remain in the traditional fee-for-service (FFS) sector, since beneficiaries with low costs may leave the FFS sector and join the HMOs. The distortion associated with this form of selection is that health plans may design their mix of health care services in order to effectuate favorable selection. This paper scrutinizes patterns of HMO membership and costs by service in the FFS sector for evidence consistent with the hypothesis that HMOs engage in service-level product distortion. We develop a multi-service model of choice between FFS and HMOs and show that if the HMO sector is underproviding (overproviding) a service relative to the FFS sector, we should observe a positive (negative) correlation between the HMO market share and average costs of those remaining in the FFS sector. We estimate the correlation between the HMO market share and the average FFS costs for different health care services using Medicare data for 1996. We find evidence indicating that there exists significant service-level selection by HMOs.     

Understanding biased selection in Medicare HMOs

OBJECTIVE: To investigate the extent of favorable health maintenance organization (HMO) selection for a longitudinal cohort of Medicare beneficiaries, examine whether the extent of favorable selection varies with the degree of Medicare HMO market penetration in a county, and explain conflicting findings in the literature on favorable HMO selection. DATA SOURCES: A panel of 1992-1996 data from the Medicare Current Beneficiary Survey (MCBS), supplemented with linked data from the Area Resource File and Medicare administrative datasets. STUDY DESIGN: Using random effects probit estimation, we model a beneficiary's HMO enrollment status as a function of self-reported health status and Medicare HMO market penetration. DATA EXTRACTION METHODS: The MCBS data for beneficiaries residing in states served by Medicare HMOs in 1992-1996 were linked by county to the supplementary datasets. PRINCIPAL FINDINGS: We find that favorable selection persists in the cohort over time on some, but not all, measures. We find no substantial association between favorable HMO selection and HMO market penetration. We find that conflicting findings in the literature on favorable HMO selection may be explained by several methodological choices, including the choice of health status measure and the structure of the sample. CONCLUSIONS: Our results support further risk adjustment of the adjusted average per capita cost (AAPCC) payment formula.     

Stage of cancer at diagnosis for Medicare HMO and fee-for-service enrollees.

OBJECTIVES. Health maintenance organizations (HMOs) with Medicare contracts often provide cancer screening and preventive services not covered under fee-for-service. This study compared cancer patients in HMOs and fee-for-service on stage at diagnosis. METHODS. The study examined stage at diagnosis for aged Medicare enrollees in HMOs and fee-for-service, using information from the Surveillance, Epidemiology, and End Results program, linked with Medicare enrollment files. Twelve cancer sites were investigated, and demographics, area of residence, year of diagnosis (1985 to 1989), and education at the census tract level were controlled. RESULTS. HMO enrollees were diagnosed at earlier stages for cancers of the female breast, cervix, colon, and melanomas and at later stages for stomach cancer. There were no differences for cancers of the prostate, rectum, buccal cavity and pharynx, bladder, uterus, kidney, and ovary. HMO effects were strongest in areas with large, mature HMOs. CONCLUSIONS. Compared with fee-for-service enrollees, HMO enrollees were diagnosed at earlier stages for cancer sites for which effective screening services are available. The earlier detection of certain cancers among HMO enrollees may result from coverage of screening services and, perhaps, promotion by HMOs of such services.     

The first 3 years of Medicare prospective payment: an overview.

This article provides a synopsis of the available evidence on the impact of the Medicare prospective payment system (PPS) for hospitals over the first 3 years of its implementation. The impact of PPS on hospitals, Medicare beneficiaries, post-hospital care, other payers for inpatient hospital services, other health care providers, and Medicare program operations and expenditures is examined.     

Geographic variations in Medicare utilization of short-stay hospital services, 1981-88

The change in Federal fiscal year 1984 from cost-based reimbursement to prospective payment at a fixed price for a known and defined product--the hospital stay--represents a fundamental change in the role of the Medicare program within the health care delivery system. In this article, national and selected geographic trends in Medicare short-stay hospital inpatient discharges since 1981 are presented, and they show the impact of the implementation of the prospective payment system.     

Medicare payment for selected adverse events: building the business case for investing in patient safety

This study estimates that Medicare extra payments under the hospital prospective payment system (PPS) range from about $700 per case of decubitus ulcer to $9,000 per case of postoperative sepsis in the five types of adverse events identifiable in Medicare claims. Medicare extra payment for the five types of events totals more than $300 million per year, accounting for 0.27 percent of annual Medicare hospital spending. But these extra payments cover less than a third of the extra costs incurred by hospitals in treating these adverse events. We conclude that both Medicare and hospitals gain financially by improving patient safety.     

Contemplating home health PPS: current patterns of Medicare service use

Implementing a per-episode prospective payment system (PPS) for home health services is one option for Medicare policy makers facing rapid increases in service use and expenditures. Analysis of data on recent episodes of Medicare home health care identified systematic differences in service patterns across provider types; these indicate potential differences in the capacity of agencies of different types to adjust to PPS. The second phase of a national demonstration, which is about to be implemented, will provide information on the extent to which the agency practices that generate much of the observed variation (such as the number of visits provided per episode) are susceptible to management decisions; and whether managers can and do respond to the incentives of per-episode prospective payment.     

Dementia and Medicare at life's end

OBJECTIVE: To determine the effect of a diagnosis of Alzheimer's disease or related dementias (ADRD), and the timing of first ADRD diagnosis, on Medicare expenditures at end of life. DATA SOURCES: Monthly Medicare payment data for the 5 years before death linked to the National Long-Term Care Survey (NLTCS) for decedents between 1996 and 2000 (N=4,899). DATA EXTRACTION METHODS: Medicare payment data for the 5 years before death were used to compare 5-year and 6-month intervals of expenditures (total and six subcategories of services) for persons with and without a diagnosis of ADRD during the last 5 years of life, controlling for age, gender, race, education, comorbidities, and nursing home status. Covariate matching was used. PRINCIPAL FINDINGS: On average, ADRD diagnosis was not significantly associated with excess Medicare payments over the last 5 years of life. Regarding the timing of ADRD diagnosis, there were no significant 5-year total expenditure differences for persons diagnosed with dementia more than 1 year before death. Payment differences by 6-month intervals were highly sensitive to timing of ADRD diagnosis, with the highest differences occurring around the time of diagnosis. There were reduced, non-significant, or negative total payment differences after the initial diagnosis for those diagnosed at least 1 year before death. Only those diagnosed with ADRD in the last year of life had significantly higher Medicare payments during the last 12 months of life, primarily for acute care services. CONCLUSIONS: ADRD has a smaller impact on total Medicare expenditures than previously reported in controlled studies. The significant differences occur primarily around the time of diagnosis. Although rates of dementia are increasing per se, our results suggest that long-term (1+ year) ADRD diagnoses do not contribute to greater total Medicare costs at the end of life.